The exchange rate between currencies fluctuates based on the economic principle of supply and demand. Also, the demand of a particular currency is in part based on the speculations of foreign exchange traders as they make guesses about the futures of particular currencies. According to Hal Varian, professor of business, economics and information management, at the University of California, Berkeley, says, "As foreign exchange speculators change their views about the future, their demand for currency changes, resulting in exchange-rate fluctuations."
Issued by the Reserve Bank of India, the rupee (represented as currency code INR) is the unit of currency for India, Pakistan and several small neighboring countries. It can be subdivided into 100 paise.
As of 2009, the rupee is fully convertible on the current account, which means that it can be bought, sold or exchanged for other currencies without restrictions. It is not convertible on the capital account, which means that there are restrictions placed on currency exchange when the movement of capital is involved. The Reserve Bank of India intends to make the rupee fully convertible by the year 2011.
Because the information technology sector outsources much of its work to India and it's earning are in U.S. dollars, IT stocks are particularly sensitive to the rupee-U.S. dollar relationship. IT stocks took a hit in May 2009 as the rupee rose in value against the dollar. Krish Shanbhag, head of research at Antique Stock Broking, says, "Since the fourth quarter earnings of these companies were anticipated at levels lower than the current value of the rupee, the appreciation of the domestic currency is very likely to impact their earnings."
There are several online currency converters with which you can quickly determine the dollar-to-rupee exchange rate. The universal currency converter at www.xe.com is a good example. In the first field, enter the number of units you wish to convert. From the first pull-down menu, select the starting currency. Choose the ending unit from the second pull-down menu. Click Go, and you will be given the most recent exchange rate between the two currencies.
